Item 7. Management’s Discussion and Analysis
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The
following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited
consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K (this “Form 10-K”).
This discussion contains forward-looking statements that are subject to risks and uncertainties and assumptions relating to our operations,
financial results, financial condition, business prospects, growth strategy and liquidity. The factors listed under “Risk Factors”
and “Forward-Looking Statements” in this Form 10-K provide examples of risks, uncertainties and events that may cause our
actual results to differ materially from the expectations described in any forward-looking statements.
Overview
We
are the only publicly traded qualified opportunity fund listed on a national securities exchange. We are a Delaware limited liability
company formed to invest in and manage a portfolio consisting primarily of commercial real estate properties, real estate-related assets,
including commercial real estate loans and mortgages, and debt and equity securities issued by other real estate-related companies, and
private equity acquisitions and investments, and opportunistic acquisitions of other qualified opportunity funds and qualified opportunity
zone businesses. We currently intend to operate in a manner that will allow us to qualify as a partnership for U.S. federal income tax
purposes.
We
are focused on identifying, acquiring, developing or redeveloping and managing commercial real estate located within qualified opportunity
zones. At least 90% of our assets consist of qualified opportunity zone property. We qualified as a qualified opportunity fund beginning
with our taxable year ended December 31, 2020. Because we are a qualified opportunity fund certain of our investors are eligible for
favorable capital gains tax treatment on their investments.
All
of our assets are and will continue to be held by, and all of our operations are and will continue to be conducted through, one or more
of our Operating Companies, either directly or indirectly through subsidiaries. We are externally managed by Belpointe PREP Manager,
LLC (our “Manager”), which is an affiliate of our sponsor, Belpointe, LLC (our “Sponsor”).
History
and Development of the Company
We
are the successor in interest to Belpointe REIT, Inc., a Maryland corporation (“Belpointe REIT”), incorporated on June 19,
2018. During the year ended December 31, 2021, we acquired all of the outstanding shares of common stock of Belpointe REIT in an exchange
offer and related conversion and merger transaction.
In
connection with the Follow-on Registration Statement, we entered into a non-exclusive dealer manager agreement with Emerson Equity LLC
(the “Dealer Manager”), a registered broker-dealer, for the sale of our Class A units through the Dealer Manager. The Dealer
Manager will enter into participating dealer agreements and wholesale agreements with other broker-dealers, referred to as “selling
group members,” to authorize those broker-dealers to solicit offers to purchase our Class A units. We will pay our Dealer Manager
commissions of up to 0.25%, and the selling group members commissions ranging from 0.25% to 4.50%, of the principal amount of Class A
unit sold in the Follow-on Offering. In addition, our Follow-on Registration Statement constitutes a post-effective amendment to our
Primary Registration Statement, conforming our Primary Offering to our Follow-on Offering.
For
the year ended December 31, 2023, we issued 98,950 Class A units in connection with our Public Offerings. Together with the gross proceeds
raised by Belpointe REIT in its prior offerings, as of December 31, 2023, we have raised aggregate gross offering cash proceeds of $354.3
million.
On
September 30, 2021, the U.S. Securities and Exchange Commission (the “SEC”) declared effective our initial registration statement
on Form S-11, as amended (File No. 333-255424) (the “Primary Registration Statement”), registering a continuous primary offering
of up to $750,000,000 in our Class A units (our “Primary Offering”). From the period of October 7, 2021, the date of the
first closing held in connection with our Primary Offering, through December 31, 2022, we issued 2,273,339 Class A units in our Primary
Offering, raising net offering proceeds of $226.0 million.
On
May 9, 2023, the SEC declared effective our follow-on registration statement on Form S-11, as amended (File No. 333-271262) (the “Follow-on
Registration Statement”), registering the offer and sale of up to an additional $750,000,000 of our Class A units on a continuous
“best efforts” basis by any method deemed to be an “at the market” offering pursuant to Rule 415(a)(4) under
the Securities Act of 1933, as amended (the “Securities Act”), including by offers and sales made directly to investors or
through one or more agents (our “Follow-on Offering” and, together with our Primary Offering, our “Public Offerings”).
In
connection with the Follow-on Registration Statement, we entered into a non-exclusive dealer manager agreement with Emerson Equity LLC
(the “Dealer Manager”), a registered broker-dealer, for the sale of our Class A units through the Dealer Manager. The Dealer
Manager will enter into participating dealer agreements and wholesale agreements with other broker-dealers, referred to as “selling
group members,” to authorize those broker-dealers to solicit offers to purchase our Class A units. We will pay our Dealer Manager
commissions of up to 0.25%, and the selling group members commissions ranging from 0.25% to 4.50%, of the principal amount of Class A
unit sold in the Follow-on Offering. In addition, our Follow-on Registration Statement constitutes a post-effective amendment to our
Primary Registration Statement, conforming our Primary Offering to our Follow-on Offering. As of December 31, 2023, $1,264,724,350 remained
unsold under our Public Offerings.
The
purchase price for Class A units in our Public Offerings is the lesser of (i) the NAV of our Class A units, and (ii) the average of the
high and low sale prices of our Class A units on the NYSE American during regular trading hours on the last trading day immediately preceding
the investment date on which the NYSE American was open for trading and trading in our Class A units occurred. Our Manager calculates
our NAV within approximately 60 days of the last day of each quarter, and any adjustments take effect as of the first business day following
its public announcement. As of December 31, 2023, our NAV per Class A units was $100.88.
45
Our
Business Outlook
Despite expectations of the U.S. falling into recession in 2023, market
conditions for multifamily and mixed-use rental properties remained strong over the past several quarters. Future economic conditions
and the demand for multifamily and mixed-use rental properties are, and the real estate industry in general is, subject to uncertainty
as a result of a number of factors, including, among others, the rate of rent growth, rate of new construction, rate of absorption, the
rate of unemployment, increasing interest rates, higher rates of inflation, instability in the banking system, the availability of credit,
financial market volatility, general economic uncertainty, increasing energy costs, supply chain disruptions and labor shortages. The
potential effect of these and other factors and the projected impact of these and other events on our business, results of operations
and financial performance, presents material uncertainty and risk with respect to our future performance and financial results, including
the potential to negatively impact our costs of operations, our financing arrangements, the value of our investments, and the laws, regulations
and governmental and regulatory policies applicable to us. As a result, our past performance may not be indicative of future results.
Given
the evolving nature of certain of these factors, the extent to which they may impact our future performance and financial results will
depend on future developments which remain highly uncertain and, as a result, at this time we are unable to estimate the impact that
these factors may have on our future financial results. Our Manager continuously reviews our investment and financing strategies for
optimization and to reduce our risk in the face of the fluidity of these and other factors.
Results
of Operations
The
following table sets forth information regarding our consolidated results of operations during the years ended December 31, 2023 and
2022 (amounts in thousands):
Year Ended December 31,
2023
2022
$ Change
% Change
Revenue
Rental revenue
$ 2,254
$ 1,391
$ 863
62 %
Total revenue
2,254
1,391
863
62 %
Expenses
Property expenses
4,179
3,809
370
10 %
General and administrative
6,335
5,798
537
9 %
Depreciation and amortization
2,067
1,291
776
60 %
Impairment of real estate
4,060
—
4,060
100 %
Total expenses
16,641
10,898
5,743
53 %
Other income
Interest income
113
1,850
(1,737 )
(94 )%
Other expense
(87 )
(469 )
382
(81 )%
Total other income
26
1,381
(1,355 )
(98 )%
Loss before income taxes
(14,361 )
(8,126 )
(6,235 )
77 %
Provision for income taxes
(1 )
(112 )
111
(99 )%
Net loss
(14,362 )
(8,238 )
(6,124 )
74 %
Net income attributable to Belpointe PREP, LLC
11
555
(544 )
(98 )%
Net loss attributable to Belpointe PREP, LLC
$ (14,351 )
$ (7,683 )
$ (6,668 )
87 %
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Revenue
Rental
Revenue
For the year ended December 31, 2023 as compared to the same period
in 2022, rental revenue increased by $0.9 million. This increase is primarily related to the amortization of below-market lease intangibles.
During the year ended December 31, 2023 one of our tenants vacated our 901-909 Central Avenue investment, therefore, we accelerated
the unamortized below-market lease liability in connection with termination of the lease. Additionally, the increase is related to acquisition
of our 1400 Davidson investment in December 2022, whereby the year ended December 31, 2023 reflects a full year of amortization of
below-market lease intangibles.
Property
Expenses
Property
expenses primarily consists of management fees, property operational expenses, real estate taxes, and utilities and insurance expenses
incurred in relation to our operating properties.
For
the year ended December 31, 2023, as compared to the same period in 2022, property expenses increased by $0.4 million. This increase
is primarily due an increase in real estate tax expenses at certain investments and an increase in third-party property management
fees.
General
and Administrative
General
and administrative expenses primarily consists of employee cost sharing expenses (pursuant to our Management Agreement and Employee
and Cost Sharing Agreement), marketing expenses, legal, audit, tax and accounting fees. See “ Certain
Relationships and Related Transactions, and Director Independence—Our Management Agreement ” for additional details
regarding our Management Agreement and “ Certain Relationships and Related Transactions, and Director
Independence—Our Employee and Cost Sharing Agreement ” for additional details regarding our employee and cost sharing
agreement.
For
the year ended December 31, 2023 as compared to the same period in 2022, general and administrative expenses increased by $0.5 million.
This increase is primarily due to higher allocation of costs incurred by our Manager and its affiliates to us, as well as dead deal costs incurred
during the current year period. These increases were partially offset by a lower marketing expenses.
Depreciation
and Amortization
For
the year ended December 31, 2023 as compared to the same period in 2022, depreciation and amortization increased by $0.8 million. This
increase is primarily due to the acquisition of properties during the year ended December 31, 2022, and due to the acceleration of unamortized
in-place lease intangible assets at our 901-909 Central Avenue investment as a result of three tenants vacating during the year ended December
31, 2023.
Impairment
of Real Estate
During
the year ended December 31, 2023, we recorded impairment charges of $4.1 million, in relation to one of our real estate assets located
in Nashville, Tennessee, based on our conclusion that the estimated fair market value of the real estate asset was lower than the carrying
value, and as a result, we reduced the carrying value to the fair market value.
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Other
income
Interest
Income
On
September 30, 2021, we lent approximately $3.5 million to CMC (the “CMC Loan”) pursuant to the terms of a secured promissory
note bearing interest at an annual rate of 12.0% and due and payable on June 27, 2022. On June 28, 2022, the CMC Loan was repaid in full,
including accrued interest of $0.3 million.
On
January 3, 2022, we lent $30.0 million (the “Norpointe Loan”) to Norpointe, LLC (“Norpointe”), an affiliate of
our Chief Executive Officer, pursuant to the terms of a promissory note secured by a first mortgage lien on certain real property located
at 41 Wolfpit Avenue, Norwalk, Connecticut 06851 (the “Norpointe Property”). On June 28, 2022, for purposes of complying
with the qualified opportunity fund requirements under the Internal Revenue Code of 1986, as amended, and related Treasury Regulations, we restructured the Norpointe Loan
(the “Restructured Norpointe Loan”). The Restructured Norpointe Loan was evidenced by a promissory note and was secured by
a first mortgage lien on the Norpointe Property. On December 13, 2022, the Restructured Norpointe Loan was repaid in full. See “ Certain Relationships and Related Transactions, and Director Independence—Our Affiliate Transactions—Our Transaction with Norpointe, LLC ” for additional details regarding our transactions with Norpointe.
On
February 23, 2022, we lent approximately $5.0 million to Visco Propco, LLC (the “Visco Loan”), pursuant to the terms of a
promissory note secured by a first lien deed of trust on certain real property located at 801 Visco Drive, Nashville, Tennessee 37210.
On December 2, 2022, the Visco Loan was repaid in full, including accrued interest of $0.2 million.
For the year ended December 31, 2022, interest income was $1.9
million and is primarily related to interest of $0.7 million earned on the Norpointe Loan, $0.7 million earned on the Restructured Norpointe
Loan, $0.2 million earned on the CMC Loan, and $0.2 million on the Visco Loan.
Further
information regarding our commercial real estate loan transactions is provided in “ Note 7 – Loans Receivable ” in the
Notes to Consolidated Financial Statements included elsewhere in this Form 10-K.
Other
expense
On
July 10, 2023, our indirect majority-owned subsidiary (the “Mortgage Borrower”) entered into an interest rate cap agreement
(the “1991 Main Interest Rate Cap”) as required under the terms of the variable rate construction loan agreement (the “1991
Main Construction Loan Agreement”) for up to $130.0 million in principal amount that the Mortgage Borrower previously entered into,
on May 12, 2023, with Bank OZK, and which is secured by 1991 Main. During the year ended December 31, 2023, we recognized a net
unrealized loss of $0.1 million on the 1991 Main Interest Rate Cap. See “ Part I, Item 1—Our Investments—1991 Main Street – Sarasota, Florida (also known as “Aster & Links”)—1991 Main Interest Rate Cap ” for additional information
regarding our 1991 Main Construction Loan Agreement and 1991 Main Interest Rate Cap.
On
June 28, 2022, through an indirect majority-owned subsidiary of our Operating Company, we acquired a 70.2% controlling interest in CMC
(the “CMC Interest”), for an initial capital contribution of $3.8 million. As part of the transaction two unaffiliated joint
venture partners (the “CMC JV Partners”) were deemed to have made a combined initial capital contribution of $3.1 million.
Following our acquisition of the CMC Interest, we discovered that one of the CMC JV Partners had misappropriated cash from the other
CMC JV Partner’s cash account. As a result, the CMC JV Partner agreed to forfeit its interest in CMC as of March 24, 2023. Other
expense for the year ended December 31, 2022, primarily relates to a loss of $0.4 million recorded in connection with the misappropriated
cash.
Provision
for Income Taxes
For the year ended December 31, 2022, provision for income taxes relates
to taxes incurred (including interest) in connection with our acquisition of Belpointe REIT. As a result of the conversion of Belpointe
REIT from a corporation into a limited liability company, Belpointe REIT was deemed to have been liquidated and its tax year ended on
October 1, 2021. Belpointe REIT’s deemed liquidation resulted in a taxable gain for the year ended October 1, 2021. In connection
with the conversion, we filed an extension for the time to file Belpointe REIT’s 2021 tax returns, however, we did not make an estimated
payment at that time as we had not yet calculated Belpointe REIT’s 2021 tax liability. As of the date of this Form 10-K, we have
paid the outstanding income tax liability, including interest.
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Net
Loss Attributable to Noncontrolling Interests
Net
loss attributable to noncontrolling interests represents the share of earnings generated in entities we consolidate in which we do not
own 100% of the equity. For the year ended December 31, 2023 as compared to the same period in 2022, net losses attributable to
noncontrolling interests decreased by $0.5 million. This decrease primarily relates to losses allocated to noncontrolling interest holders
on our CMC and 900 8th Avenue South investments in the prior year period which was based upon an allocation of each investment’s
net assets at book value as if the investments were hypothetically liquidated at the end of each reporting period.
Liquidity
and Capital Resources
Our
primary needs for liquidity and capital resources are to fund our investments, including construction and development costs, pay our
offering and operating fees and expenses, pay any distributions that we make to the holders of our units and pay interest on any outstanding
indebtedness that we incur.
Our
offering and operating fees and expenses include, among other things, legal, audit and valuation fees and expenses, federal and state
filing fees, SEC, FINRA and NYSE American filing fees, printing expenses, administrative fees, transfer agent fees, marketing and distribution
fees, the management fee that we pay to our Manager, and fees and expenses related to acquiring, financing, appraising, and managing
our commercial real estate properties. We do not have office or personnel expenses as we do not have any employees.
Where
our Manager and its affiliates, including our Sponsor, have funded, and in the future if they continue to fund, our liquidity and capital
resource needs by advancing us offering and operating fees and expenses, we reimburse our Manager and its affiliates, including our Sponsor,
pursuant to the terms of our Management Agreement and Employee and Cost Sharing Agreement. Fees payable and expenses reimbursable to
our Manager and its affiliates, including our Sponsor, may be paid, at the election of the recipient, in cash, by issuance of our Class
A Units at the then-current NAV, or through some combination of the foregoing. There were no organization or Public Offering costs incurred
by our Manager and its affiliates during the years ended December 31, 2023 and 2022. During the years ended December 31, 2023
and 2022, our Manager and its affiliates, including our Sponsor, incurred operating expenses of $2.9 million and $2.9 million, respectively,
on our behalf.
During
the year ended December 31, 2022, our indirect wholly-owned subsidiary entered into a construction management agreement for the development
of 1991 Main. For additional details regarding our 1991 Main investment, see “ Part I, Item 1—Our Investments—1991 Main Street – Sarasota, Florida (also known as “Aster & Links ”).” The construction management agreement contains
terms and conditions that are customary for a project of this type and will be subject to guaranteed maximum price. As of December 31,
2023, we had an unfunded capital commitment of $61.8 million under the terms of this agreement. As of the date of this Form 10-K,
we currently anticipate that the remaining funding for construction and soft costs associated with the development of 1991 Main will
be a minimum of $84.8 million (inclusive of the aforementioned unfunded capital commitment).
During the year
ended December 31, 2023, our indirect majority-owned subsidiary (the “Mortgage Borrower”) entered into a variable-rate
construction loan agreement for up to $130.0 million in principal amount (the “1991 Main Construction Loan”) to fund the
development of 1991 Main. Advances under the construction loan bear interest at a per annum rate equal to the one-month term Secured
Overnight Financing Rate (SOFR) plus 3.45%, subject to a minimum all-in per annum rate of 8.51%. The 1991 Main Construction Loan has
an initial maturity date of May 12, 2027 and contains a one-year extension option, subject to certain restrictions. As of December 31,
2023, we have drawn down $23.1 million on the 1991 Main Construction Loan.
As
discussed in “ Part I, Item 1—Our Investments—1991 Main Street – Sarasota, Florida (also known as “Aster & Links”)—1991 Main Mezzanine Loan ”, on January 31, 2024, our indirect majority-owned subsidiary (the “Mezzanine
Borrower”) entered into a mezzanine loan agreement for up to $56.4 million in principal amount (the “1991 Main Mezzanine
Loan”). The 1991 Mezzanine Loan bears interest at a rate of 13.0% per annum, and is secured by 1991 Main.
In
connection with the 1991 Mezzanine Loan, we are required to maintain an interest reserve and carry reserve for purposes of paying accrued
but unpaid interest on the 1991 Mezzanine Loan and interest, principal and other obligations under the 1991 Main Construction Loan (the
“Reserves”). Cash proceeds from the 1991 Mezzanine Loan totaled $39.8 million, after Reserves of $15.0 million were held
back at closing, and incurring closing costs of $1.6 million.
Proceeds
under the 1991 Mezzanine Loan may be used to reimburse the Company for certain costs and expenses incurred in relation to, and to fund
the continued development of, 1991 Main. The 1991 Mezzanine Loan has an initial maturity date of May 12, 2027 and contains a one-year
extension option, subject to certain restrictions. S ee “ Part I, Item 1—Our Investments—1991 Main Street – Sarasota, Florida (also known as “Aster & Links”) ,” for additional information regarding the
1991 Main Construction Loan and the 1991 Mezzanine Loan.
During
the year ended December 31, 2023, our indirect majority-owned subsidiary entered into a construction
management agreement in connection with the development of 1000 First. For additional details regarding our acquisition of 1000 First,
see “ Part I, Item 1—Our Investments—1000 First Avenue North and 900 First Avenue North – St. Petersburg, Florida (also known as “Viv”) .” The construction management agreement contains terms and conditions that are customary
for a project of this type and will be subject to guaranteed maximum price. As of December 31, 2023, we had an unfunded capital
commitment of $40.3 million under the terms of this agreement. We currently anticipate that the remaining funding for construction and
soft costs associated with the development of 1000 First will be a minimum of approximately $119.2 million (inclusive of the aforementioned
unfunded capital commitment).
We
expect to obtain the liquidity and capital resources that we need over the short and long-term from the proceeds of our Public Offerings
and any future offerings that we may conduct, from the advancement of reimbursable fees and expenses by our Manager and its affiliates,
including our Sponsor, from secured or unsecured financings from banks and other lenders and from any undistributed funds from operations.
For additional details regarding our Public Offering, see “ Part II, Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Use of Proceeds from Registered Sales of Securities ”
49
We
currently anticipate that our available capital resources, including the proceeds from our Public Offerings and the proceeds from any
construction or other loans that we may incur, when combined with cash flow generated from our operations, will be sufficient to meet
our anticipated working capital and capital expenditure requirements over the next 12 months and beyond.
Leverage
We
employ leverage in order to provide more funds available for investment. We believe that careful use of conservatively structured leverage
will help us to achieve our diversification goals and potentially enhance the returns on our investments.
Our
targeted aggregate property-level leverage, excluding any debt at the Company level or on assets under development or redevelopment,
after we have acquired a substantial portfolio of stabilized commercial real estate, is between 50-70% of the greater of the cost (before
deducting depreciation or other non-cash reserves) or fair market value of our assets. During the period when we are acquiring, developing
and redeveloping our investments, we may employ greater leverage on individual assets. An example of property-level leverage is a mortgage
loan secured by an individual property or portfolio of properties incurred or assumed in connection with our acquisition of such property
or portfolio of properties. An example of debt at the Company level is a line of credit obtained by us or our Operating Companies.
Our
Manager may from time to time modify our leverage policy in its discretion in light of then-current economic conditions, relative costs
of debt and equity capital, market values of our assets, general conditions in the market for debt and equity securities, growth and
acquisition opportunities or other factors. There is no limit on the amount we may borrow with respect to any individual property or
portfolio.
Cash
Flows
The
following table provides a breakdown of the net change in our cash and cash equivalents and restricted cash (amounts in thousands):
Years Ended December 31,
2023
2022
Cash flows used in operating activities
$ (6,945 )
$ (6,651 )
Cash flows used in investing activities
(145,123 )
(63,530 )
Cash flows provided by financing activities
30,686
22,802
Net decrease in cash and cash equivalents and restricted cash
$ (121,382 )
$ (47,379 )
As
of December 31, 2023 and 2022, cash and cash equivalents and restricted cash totaled approximately $23.6 million and $145.0 million,
respectively.
Cash
flows used in operating activities for the year ended December 31, 2023 primarily relates to the payment of management fees and
employee cost sharing expenses as well as payments for marketing, legal, tax and accounting fees. Cash flows used in operating activities
for the year ended December 31, 2022 primarily relates to the payment of management fees and employee cost sharing expenses as well
as payments for marketing, legal, tax and accounting fees. These outflows were partially offset by interest received on our Norpointe
Loan, Restructured Norpointe Loan and CMC Loan during the period.
Cash flows used in
investing activities for the year ended December 31, 2023 primarily relates to the funding of development properties. For additional
details regarding our development properties, see “ Part I, Item 1—Our Investments .” Cash flows used in investing activities
for the year ended December 31, 2022 primarily relates to the funding of loans receivable in addition to funding costs for our development
properties and investments in real estate. These outflows were partially offset by inflows from the repayment of the CMC and Restructured
Norpointe Loans during the period as well as cash acquired as part of the acquisition of CMC ( Note 7 ).
Cash
flows provided by financing activities for the year ended December 31, 2023 primarily relates to the net proceeds from 1991
Main Construction Loan, proceeds from our Primary Offering, and proceeds from our short-term loan from an affiliate. Cash flows
provided by financing activities for the year ended December 31, 2022 primarily relates to net proceeds received from the
Primary Offering partially offset by the repayment of the Acquisition Loan.
Critical
Accounting Policies
Our
audited consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States
of America. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the
reported amounts of assets, liabilities, revenue, expenses, and related disclosures. We evaluate our estimates and assumptions on an
ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under
the circumstances. Our actual results could differ from these estimates.
Our
significant accounting policies are described in “ Note 2 — Summary of Significant Accounting Policies .” Many of these
accounting policies require judgment and the use of estimates and assumptions when applying these policies in the preparation of our
consolidated financial statements. On a quarterly basis, we evaluate these estimates and judgments based on historical experience as
well as other factors that we believe to be reasonable under the circumstances. These estimates are subject to change in the future if
underlying assumptions or factors change. Certain accounting policies, while significant, may not require the use of estimates. The recent
accounting changes that may potentially impact our business are described under “Recent Accounting Pronouncements” in “ Note 2 — Summary of Significant Accounting Policies .”
Off-Balance
Sheet Arrangements
We
currently have no off-balance sheet arrangements that are reasonably likely to have a material current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Item
7A. Quantitative and Qualitative Disclosures about Market Risk.
We
are a smaller reporting company, as defined in Item 10(f)(1) of Regulation S-K, as as a result are not required to provide the information
required by this Item.
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